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Housing Finance Chartbook

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Housing Finance Chartbook HOUSING FINANCE POLICY CENTER HOUSING FINANCE AT A GLANCE A MONTHLY CHARTBOOK April 2020 1 ABOUT THE CHARTBOOK HOUSING FINANCE POLICY CENTER STAFF The Housing Finance Policy Center’s (HFPC) mission is to Laurie Goodman produce analyses and ideas that promote sound public Center Vice President policy, efficient markets, and access to economic Alanna McCargo opportunity in the area of housing finance. At A Glance, a Center Vice President monthly chartbook and data source for policymakers, academics, journalists, and others interested in the Jim Parrott government’s role in mortgage markets, is at the heart of Nonresident Fellow this mission. Jun Zhu Nonresident Fellow We welcome feedback from our readers on how we can make At A Glance a more useful publication. Please email Sheryl Pardo any comments or questions to [email protected]. Associate Director of Communications Karan Kaul To receive regular updates from the Housing Finance Senior Research Associate Policy Center, please visit here to sign up for our bi-weekly newsletter. Michael Neal Senior Research Associate Jung Choi Research Associate Sarah Strochak Research Analyst John Walsh Research Assistant Caitlin Young Research Assistant Alison Rincon Director, Center Operations CONTENTS Overview Market Size Overview Value of the US Residential Housing Market 6 Size of the US Residential Mortgage Market 6 Private Label Securities 7 Agency Mortgage-Backed Securities 7 Origination Volume and Composition First Lien Origination Volume & Share 8 Mortgage Origination Product Type Composition (All Originations) 9 Percent Refi at Issuance 9 Cash-Out Refinances Loan Amount After Refinancing 10 Cash-out Refinance Share of All Originations 10 Total Home Equity Cashed Out 10 Nonbank Origination Share Nonbank Origination Share: All Loans 11 Nonbank Origination Share: Purchase Loans 11 Nonbank Origination Share: Refi Loans 11 Securitization Volume and Composition Agency/Non-Agency Share of Residential MBS Issuance 12 Non-Agency MBS Issuance 12 Non-Agency Securitization 12 Credit Box Housing Credit Availability Index (HCAI) Housing Credit Availability Index 13 Housing Credit Availability Index by Channel 13-14 Credit Availability for Purchase Loans Borrower FICO Score at Origination Month 15 Combined LTV at Origination Month 15 DTI at Origination Month 15 Origination FICO and LTV by MSA 16 Nonbank Credit Box Agency FICO: Bank vs. Nonbank 17 GSE FICO: Bank vs. Nonbank 17 Ginnie Mae FICO: Bank vs. Nonbank 17 GSE LTV: Bank vs. Nonbank 18 Ginnie Mae LTV: Bank vs. Nonbank 18 GSE DTI: Bank vs. Nonbank 18 Ginnie Mae DTI: Bank vs. Nonbank 18 State of the Market Mortgage Origination Projections & Originator Profitability Total Originations and Refinance Shares 19 Originator Profitability and Unmeasured Costs 19 Housing Supply Months of Supply 20 Housing Starts and Home Sales 20 Housing Affordability National Housing Affordability Over Time 21 Affordability Adjusted for MSA-Level DTI 21 Home Price Indices National Year-Over-Year HPI Growth 22 Changes in CoreLogic HPI for Top MSAs 22 First-Time Homebuyers First-Time Homebuyer Share 23 Comparison of First-time and Repeat Homebuyers, GSE and FHA Originations 23 Delinquencies and Loss Mitigation Activity Negative Equity Share 24 Loans in Serious Delinquency/Foreclosure 24 Loan Modifications and Liquidations 24 GSEs under Conservatorship GSE Portfolio Wind-Down Fannie Mae Mortgage-Related Investment Portfolio 25 Freddie Mac Mortgage-Related Investment Portfolio 25 Effective Guarantee Fees & GSE Risk-Sharing Transactions Effective Guarantee Fees 26 Fannie Mae Upfront Loan-Level Price Adjustment 26 GSE Risk-Sharing Transactions and Spreads 27-28 Serious Delinquency Rates Serious Delinquency Rates – Fannie Mae, Freddie Mac, FHA & VA 29 Serious Delinquency Rates – Single-Family Loans & Multifamily GSE Loans 29 Agency Issuance Agency Gross and Net Issuance Agency Gross Issuance 30 Agency Net Issuance 30 Agency Gross Issuance & Fed Purchases Monthly Gross Issuance 31 Fed Absorption of Agency Gross Issuance 31 Mortgage Insurance Activity MI Activity & Market Share 32 FHA MI Premiums for Typical Purchase Loan 33 Initial Monthly Payment Comparison: FHA vs. PMI 33 Related HFPC Work Publications and Events 34 INTRODUCTION COVID-19 Flips 2020 Mortgage Market The impact of COVID-19 was first manifested by the drop in Expectations Treasury and mortgage rates in January, with primary mortgage rates falling. Lower rates along with still strong labor market conditions and housing equity growth boosted In a remarkably short time period, COVID-19 has applications for both purchase and refinance mortgages by dramatically altered the course of broad mortgage market 11 and 88 percent respectively over the first month of this metrics. At the end of 2019, trends in mortgage applications year. suggested that, over the course of 2020, purchase mortgage originations would rise and refinance originations would As COVID-19’s impact became clearer, purchase mortgage decrease. As the full effect of COVID-19 became more applications plunged, falling 36 percent since February to a apparent, refinancing applications leaped, purchase level last seen in 2015 (figure above). Refinance applications applications plummeted, and the mortgage market rose 116 percent to the highest level since at least 2011. expectations established at the beginning of this year were Although refinance applications have receded in recent reversed. weeks, they remain elevated. Amidst these developments, mortgage market expectations have reversed, purchase Historical and forecasted originations by Fannie Mae, origination volume is now expected to fall in 2020 while Freddie Mac and the Mortgage Bankers Association (MBA) refinance volume is expected to be higher (table above). are shown on page 19 of this Chartbook. To measure changes in mortgage market expectations, we average Fannie Mae’s COVID-19’s impact goes well beyond simply reversing and the MBA’s January estimates, along with Freddie Mac’s expectations for the mortgage market. COVID-19 has December estimate, of 2019 mortgage originations as well as infected nearly every part of the mortgage market’s their forecast of originations in 2020. We then compare what structure, from lending standards in the primary market to they thought would happen in 2020 with the projections in investor liquidity in the secondary market, particularly in the their most recent April forecasts. non-agency sector, and the health of independent mortgage banks which account for about two-thirds of new agency Mortgage Applications Index Refinance Applications Index, March 16 1990=100 origination. 7000 Purchase Applications Index, March 16 1990=100 350 The federal policy response has been swift, with 6000 300 Congressional action through the CARES Act providing borrower forbearance and the Federal Reserve purchasing 5000 250 large amounts of agency mortgage-backed securities. However, further actions are needed, including a servicing 4000 200 advance facility to aid the independent mortgage bankers as they struggle to access the funding that is needed to continue 3000 150 to make payments to investors in the wake of widespread forbearance, as well as a financing facility for non-agency 2000 100 securities. 1000 50 INSIDE THIS ISSUE 0 0 • The Urban Institute’s Housing Credit Availability Index 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 stood at 5.3 percent in Q4 2019, unchanged from Q3 Refinance Mortgage Applications (2020) Refinance Mortgage Applications (Up to 2019) Purchase Mortgage Applications (2020) Purchase Mortgage Applications (Up to 2019) 2014 (Page 13). Source: Mortgage Bankers Association. • CAS and STACR spreads widened significantly in March 2020, reflecting investor expectations of higher defaults Over 2019, purchase mortgage applications held largely and credit losses owing to COVID-19 (Page 28). steady, supported by lower mortgage rates and strong labor • The Federal Reserve, as part of its efforts to stabilize the market conditions (figure above). It was expected that rates financial markets, purchased $292.2 billion in Agency would stay low and the economy would remain strong, raising MBS in March 2020, 178.2% of gross issuance and the purchase mortgage originations in 2020 (table below). By largest volume of purchases in a single month (Page 31). contrast, refinancing originations were expected to be lower in 2020, since refinance applications had begun to decline in the latter half of 2019 (figure above). Forecast of Mortgage Originations, Billions of Dollars Forecast Month 2019 2020 Total Purchase Refinance Total Purchase Refinance Dec. 2019/Jan. 2020 $2,120 $1,266 $853 $1,986 $1,336 $650 April 2020 $2,282 $1,279 $1,003 $2,432 $1,148 $1,311 Year-over-Year Change Forecast Month 2019 2020 Total Purchase Refinance Dec. 2019/Jan. 2020 -6% 6% -24% April 2020 7% -10% 31% Source: Author’s calculations from Fannie Mae, Freddie Mac, and MBA. OVERVIEW MARKET SIZE OVERVIEW The Federal Reserve’s Flow of Fund Report has indicated a gradually increasing total value of the housing market, driven primarily by growing home equity since 2012. The Q4 2019 numbers show that while total home equity was steady this quarter at $19.7 trillion, mortgage debt outstanding grew slightly from $11.1 trillion in Q3 to $11.2 trillion in Q4 2019, bringing the total value of the housing market to $30.9 trillion, 20.7 percent higher than the pre- crisis peak in 2006. Agency MBS account for 61.6 percent of the total mortgage debt outstanding, private-label securities make up 3.9 percent, and unsecuritized first liens make up 30.0 percent. Home equity loans comprise the remaining 4.5 percent of the total. Value of the US Single Family Housing Market Debt Equity Total value ($ trillions) 35.0 30.0 $30.9 25.0 20.0 $19.7 15.0 10.0 $11.2 5.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources: Federal Reserve Flow of Funds and Urban Institute. Last updated April 2020. Note: Single family includes 1-4 family mortgages. The home equity number is grossed up from Fed totals to include the value of households and the non-financial business sector.
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